Bank of California, National Ass v. Richardson

Citation63 L.Ed. 372,39 S.Ct. 165,248 U.S. 476
Decision Date27 January 1919
Docket NumberNo. 262,262
PartiesBANK OF CALIFORNIA, NATIONAL ASS'N, v. RICHARDSON, Treasurer of State of California
CourtUnited States Supreme Court

Mr. E. S. Pillsbury, Mr. F. D. Madison, Mr. Oscar Sutro, and Mr. Alfred Sutro, all of San Francisco, Cal., for plaintiff in error.

[Argument of Counsel from page 477-478 intentionally omitted] Mr. U. S. Webb and Mr. Raymond Benjamin, both of San Francisco, Cal., for defendant in error.

[Argument of Counsel from page 478-480 intentionally omitted] Mr. Chief Justice WHITE delivered the opinion of the Court.

Except as to real estate, which is taxed directly in the name of the owner, all the available resources of banks for the purposes of taxation are reached under the law of California, not by an immediate levy on the banks as the owner, but by annual assessment and tax thereon made by the State Board of Equalization against the stockholders of banks. The state law places the duty upon the banks to pay the tax assessed against their stockholders, with the obligation on the stockholders to repay, sanctioned by a right conferred upon the banks to sell the stock of any stockholder failing to refund.

The Bank of California, organized under the National Banking Law (Act June 3, 1864, c. 106, 13 Stat. 99) and established in San Francisco, commenced this suit to recover the amount of a tax, levied against its stockholders in 1915 under the law previously stated, which it had paid under protest claiming that the tax was not only unlawful under the state law but illegal under the law of the United States governing the right of a state to tax national banks and their stockholders. The case is here to review a judgment denying the right to recover, on the ground that the tax had been lawfully exacted under both the law of the state and that of the United States.

The decision below, in so far as it rested upon the state law, is binding and we put that subject out of view. To understand the contentions as to the law of the United States requires a brief statement of the tax levied and the particulars in which it is complained of. The capital of the bank was $8,500,000, evidenced by 85,000 shares of the par value of $100 each. D. O. Mills & Company was a national bank established at Sacramento and the California Bank was a stockholder in that bank to the extent of 2,501 shares. The California Bank was also the owner of 1,001 shares of stock in the Mission Bank, a banking corporation organized under the state law and doing business in San Francisco. The Board of Equalization in 1915 fixed the value of all the assets of the California Bank at the sum of $15,775,252.67. The Board included in the assets making up this amount the stock standing in the name of the California Bank, both in the D. O. Mills National Bank and in the Mission State Bank; the first, the Mills National Bank stock, being Computed as worth $625,546.30, and the second, the Mission State Bank stock, as worth $121,916.50.

Upon these valuations, the Board assessed the California Bank as a stockholder in the D. O. Mills National Bank and as a stockholder in the Mission State Bank for the shares of stock which it held in those banks, valuing each at the sum previously stated. Besides, the stockholders of the California National were assessed for the value of the assets of that bank, including in the amount the full value of the shares of stock owned by the bank in the Mills National and Mission State Banks.

The controversy grows out of the asserted illegality of the twofold tax levied on the assessments of the California Bank as a stockholder in the Mills National Bank and in the Mission State Bank. Its solution depends upon the effect of Rev. St. 5219 (Comp. St. § 9784), the text of which is in the margin.1

Without considering some modifications made by the Act of February 10, 1868 (15 Stat. 34, c. 7 [Comp. St. § 9784]), which are negligible for the purposes of the questions before us, the section is but the reproduction of a provision of section 41 of the Act of June 3, 1864, dealing with the organization of national banks. 13 Stat. 99, 112. The forms of expression used in the section make it certain that in adopting it the legislative mind had in view the subject of how far the banking associations created were or should be made subject to state taxation, which presumably it was deemed necessary to deal with in view of the controversies growing out of the creation of the Bank of the United States and dealt with by decisions of this court. McCulloch v. Maryland, 4 Wheat. 316, 436, 4 L. Ed. 579; Osborn v. Bank, 9 Wheat. 738, 867, 6 L. Ed. 204; Weston v. Charleston, 2 Pet. 449, 7 L. Ed. 481.

There is also no doubt from the section that it was intended to comprehensively control the subject with which it dealt and thus to furnish the exclusive rule governing state taxation as to the federal agencies created as provided in the section. All possibility of dispute to the contrary is foreclosed by the decisions of this court. People v. Weaver, 100 U. S. 539, 25 L. Ed. 705; Mercantile National Bank v. New York, 131 U. S. 138, 154, 7 Sup. Ct. 826, 30 L. Ed. 895; Owensboro National Bank v. Owensboro, 173 U. S. 664, 19 Sup. Ct. 537, 43 L. Ed. 850; Covington v. First National Bank, 198 U. S. 100, 25 Sup. Ct. 562, 49 L. Ed. 963.

Two provisions in apparent conflict were adopted. First, the absolute exclusion of power in the states to tax the banks, the national agencies created, so as to prevent all interference with their operations, the integrity of their assets, or the administrative governmental control over their affairs. Second, preservation of the taxing power of the several states so as to prevent any impairment thereof from arising from the existence of the national agencise created, to the end that the financial resources engaged in their development might not be withdrawn from the reach of state taxation, but on the contrary that every resource possessed by the banks as national agencies might in substance and effect remain liable to state taxation.

The first aim was attained by the nonrecognition of any power whatever in the states to tax the federal agencies, the banks, except as to real estate specially provided for, and, therefore, the exclusion of all such powers. The second was reached by a recognition of the fact that, considered from the point of view of ultimate and beneficial interest, every available asset possessed or enjoyed by the banks would be owned by their stockholders and would be, therefore, reached by taxation of the stockholders as such. Full and express power on that subject was given, accompanied with a limitation preventing its exercise in a discriminatory manner, a power which again from its very limitation was exclusive of other methods of taxation and left, therefore, no room for taxation of the federal agency or its instrumentalities or essential accessories except as recognized by the provision in question.

Let us come to consider whether the taxation in question was sanctioned by the Act of Congress as thus understood. We do so, first, from the point of view of the two-fold tax which was based on the ownership by the California Bank of stock in the D. O. Mills National Bank, and, second, as to the taxes which resulted from the ownership by the California Bank of stock in the Mission State Bank.

In Bank of Redemption v. Boston, 125 U. S. 60, 8 Sup. Ct. 772, 31 L. Ed. 689, it was determined that the stock held by one national bank in another is governed by the power to tax stockholders given by the statute. Hence, the circumstance of the ownership of the stock by the California Bank in the D. O. Mills National Bank in no way deflects the operation of the statute. This being the case, as the taxation of the California Bank as a stockholder in the Mills Bank conformed to the grant of power to tax stockholders of national banks, it results that the assessment for taxation made upon that basis was within the state authority and was rightly decided so to be.

But the principle upon which this rests inevitably leads to the further conclusion, that the inclusion of the stock ownership of the California Bank in the Mills Bank as an asset of the California Bank for the purpose of taxing the stockholders of the latter bank was a disregard of the provision as to taxing stockholders fixed by the statute.

Indeed, it is apparent that the use of the power conferred by the statute to tax the California Bank as a stockholder in the Mills National Bank and in addition to avail of such stock ownership for the purpose of taxing the shareholders of the California Bank, was but to accept the statute on the one hand, and to exert on the other a power which could have no existence consistently with the statute. To say that the two taxes, the one levied on the bank as a stockholder in the Mills National Bank, and the other levied on the stockholders of the California Bank, were valid because a taxation of different persons, the California Bank on the one hand and the stockholders of the California Bank on the other, serves only to emphasize the plain disregard of the statute which would result from the enforcement of the taxes in question.

It is undoubted that the statute from the purely legal point of view, with the object of protecting the federal corporate agencies which it created from state burdens and securing the continued existence of such agencies despite the changing incidents of stock ownership, treated the banking corporations and their stockholders as different. But it is also undoubted that the statute for the purpose of preserving the state power of taxation, considering the subject from the point of view of ultimate beneficial interest, treated the stock interest, that is, the stockholder, and the bank as one and subject to one taxation by the methods which it provided.

Again, when the purposes of the statute are taken into view, the...

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